Indian economy is running with Rs 5 lakh crores, less than the amount of cash that would have been present in the economy if demonetisation had not happened.
This is one of the key findings of a high-level internal report on the benefits of demonetization prepared by top government officials.
At the time of demonetization, currency worth Rs 17.77 crores were in circulation in the economy. Out of this, Rs 15.44 lakh crores was in high denomination notes, which were phased out. Rs 2.33 lakh crores were in small denomination notes with a value of Rs 100 or less.
If the currency in circulation had continued to be printed at the same rate as before demonetisation, then by May 2017, currency in circulation would have been of the value of Rs 19.25 lakh crores.
According to RBI figures, at the end of April, the total amount of currency in circulation was Rs 14.2 lakh crores.
One of the most important benefits of demonetization has been the sharp increase in the country’s tax base.
The number of people who have filed self-assessment forms for the financial year 2016-17 grew by 23.8 per cent.
Demonetization has sent a message that those who evade tax are engaging in a form of financial terrorism and that the law is now going to come after them.
Before demonetisation roughly 1 lakh new pan cards were issued every day. Now between 2 – 3 lakhs of PAN cards is being issued every day.
Demonetisation helped to ensure that the advance of a RBI rate cut is actually passed on to the consumer.
Between January 2015 and October 2016, the RBI reduced interest rates by 175 basis points. However, on average banks passed on only about 50 basis point rate cut to the consumer. After demonetisation, though, banks have already reduced the Marginal Cost of Fund Based Lending Rates (MCLR) by around 100 basis points and the government expects that the reduction will continue.
Demonetization gave a boost to revive the housing sector which has been pathetic for the last few years. The interest rate for individual borrowers is already done to 8.2 per cent. Before demonetisation, interest rates hovered at around 9.3 percent.
Cashless payment at petrol/diesel outlets before demonetization was roughly Rs 4,500 crore.
Now the figure has jumped to Rs 12,000 crore. In percentage terms, cashless payments at petrol pumps have gone high by from 9 percent to more than 20 percent.
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